Photo illustration of Twitter logos.(Photo: Mary Turner, Getty Images)
SAN FRANCISCO - Twitter's revenue will double and its profit will surge by 2015, one of the top banks underwriting the company's initial public offering is telling investors, a key forecast for anyone trying to decide whether to buy Twitter shares this week.
Two investors who heard the numbers told USA TODAY that the underwriter, with access to Twitter's internal forecasts, said the company may generate about $620 million in revenue and make roughly $40 million in adjusted earnings, before interest, tax, depreciation and amortization, or EBITDA, this year.
Next year, revenue may increase to about $950 million and adjusted EBITDA will climb to roughly $80 million, according to the bank's estimates shared with investors.
In 2015, revenue may reach about $1.24 billion, while adjusted EBITDA soars to roughly $200 million, the bank also estimated, according to the investors.
The investors spoke on condition of anonymity. They did not want to be identified because the forecasts are private.
David Wells, a spokesman at Goldman Sachs, which is leading Twitter's IPO, declined to comment Monday. Mary Claire Delaney, a spokeswoman at Morgan Stanley, the other bank leading the IPO, did not respond to a request for comment.
Such forecasts are common during IPOs, and are often based on company projections that are shared with the main underwriting banks. The banks then share their forecasts with prospective investors.
The estimates are crucial because investors need guidance on how profitable companies may be in the future to put a proper valuation on the business and decide how much they are willing to pay for shares in the IPO.
However, the forecasts are not made public in IPO documents, or even during road show investor meetings, because companies and underwriting banks want to avoid lawsuits later if the guidance is missed.
In Twitter's case, the bank forecasts paint a picture of a company that is growing fast but spending heavily, limited profitability. But in 2015, that may change as revenue keeps climbing quickly, while spending declines.
Twitter's adjusted EBITDA margins will be roughly 6.5% this year and 8.4% in 2014, according to the forecasts shared with investors. In 2015, margins may jump to about 16%, the estimates suggest.
"There will be a nice inflection point for Twitter a few years from now, which makes it attractive," says Thomas Wyman, chief investment officer of The Global Internet Fund.
On Monday, Twitter raised the price range for its IPO to $23 to $25 per share from an earlier range of $17 to $20, suggesting the company is getting strong interest from investors ahead of a likely stock market debut Thursday.
Wyman wants to buy Twitter shares in the IPO, but he said that the stock is no longer available because Goldman Sachs already has enough orders from investors to make the offering about 10 times over-subscribed.
The initial price range, set Oct. 24, valued Twitter at about $10 billion to $13 billion, which was considered cautious by some analysts and investors. If Twitter prices its IPO at $24, the middle of the new range, the company would be valued at almost $17 billion.
Anthony Noto, the Goldman banker leading Twitter's IPO, left an investor road show meeting at the Ritz-Carlton hotel in San Francisco on Monday afternoon looking relaxed and happy. When asked how the offering was going, he declined to comment, saying he likes to remain "very private."